Plan for Tax Reform

Our rapidly growing national debt is one of the most pressing issues
facing the future of our great country. The United States cannot
continue to run huge federal budget deficits. Financing federal
overspending through continued borrowing threatens to drown Americans in high taxes and heavy debt leading to a less prosperous future.

Since 1970, the annual federal budget has been balanced during only
one four-year period and the federal deficit has climbed from $400
billion in 1970 to over $16 trillion today. If we continue on our
current path, in 10 years 95% of all federal tax revenues will be
consumed by payments of interest on the national debt and mandatory
programs like Social Security, Medicare and Medicaid. This will leave
only 5% of our annual tax revenue available for funding national defense
and other essential functions of the government.

Our national debt-to-GDP ratio rivals that of countries like Ireland,
Portugal and Greece, which are facing sovereign debt crises. By the end
of this decade, the federal deficit will climb to (and remain at) no
less than 100% of our GDP. According to economists, once the nation’s
debt exceeds 90% of GDP, it begins to stifle economic growth. President
Obama had set the wrong kind of new record, we can change that. The national debt has
increased faster under his administration than under any other president
in history. This runaway government spending paralyzes the job market,
erodes confidence among America’s employers and has caused the worst
economic recovery since the Great Depression.

Thanks to the insistence of House Republicans, discretionary spending
in 2016 has been pushed back all the way to 2008 levels.And we can achieved even greater reductions we need to make significant deficit
reduction while at the same time enacting $620 billion in permanent tax relief, including a five year extension to bonus depreciation.

Because our current path threatens our economy and is unsustainable, I will join the House Republicans in putting forward a pro-growth tax reform
plan that fundamentally changes our tax policy. By lowering rates,
increasing the standard deduction, streamlining seven tax brackets into
three and eliminating a host of special-interest provisions, my plan
simplifies the tax code dramatically for families and individuals. And
by providing incentives for savings and investment, it fosters economic
growth and job creation while ensuring that Americans spend far less
time and money filing their taxes.

Under my plan, small businesses will no longer be taxed under the
individual side of the code. Instead, they’ll benefit from a critical
distinction between wage and business income. This allows for a lower
tax rate for small businesses of 25%—the lowest tax rate on pass-through
income since before World War II.

Job creators of all sizes will also be able to take advantage of full
and immediate expensing on investments in new equipment and
technology—another historic first. This zero tax rate on new business
investment is a vast departure from today’s complex depreciation rules,
which direct businesses to write off purchases over long and often
arbitrary periods of time.

It also cuts America’s 35% corporate income-tax rate—the highest in
the industrialized world—to a flat 20%. In a change designed to
strengthen our global competitiveness, American job creators will no
longer be taxed both abroad and at home on the same dollar of income.
There will be a zero tax rate on dividends brought home to America.

The current IRS will not exist, but will be redesigned into three
distinct service units—one staffed with expertise on business taxation,
and another focused on state-of-the art customer service to families and
individuals. A third, independent unit will be geared toward helping South Texans quickly resolve their unique tax challenges—in effect, a
small-claims court or mediation for tax disputes so individuals and small businesses
don’t spend thousands of dollars resolving minor tax issues.

I am dedicated to delivering a tax code for South Texans that truly
works for them—one that is built on the principles of growth,
simplicity, fairness.